What’s Keeping Limited Partners Up at Night?

Turmoil in the Middle East and a slowdown in China and other emerging markets continue to rank as some of the chief concerns among institutional investors, according to a new survey out from Commonfund.

The survey of 200 investors including pensions, charities, endowments and foundations, completed in late February and early March, found that some 46% of investors viewed a slowdown in emerging markets as a significant risk, up from 26% a year earlier. The percentage of investors worried about tensions in the Middle East also increased to 55% from 46% in 2012.

A smaller percentage of investors are concerned about gridlock in Washington over debt or a recurring economic crisis in Europe than in 2012, according to the results. Concerns about the U.S. recession also dwindled but new worries over rising interest rates and the potential for a geopolitical crisis have crept onto investors’ radars.

Despite a booming year for public markets in 2013, on average the investors surveyed predicted that the S&P 500 Index would rise by just 6.5% in 2014.

That may explain why more than a quarter of respondents said they planned to decrease their allocation to U.S. equities, compared with just 9% who planned to decrease their allocations to private equity and venture capital.

In fact, nearly half of those surveyed said they planned to increase their allocations to private equity during the next 12-18 months, compared with just 14% that planned to increase exposure to U.S. equities.